Ghana’s cedi, which recently hit a new low against the US dollar, is now expected to rebound, driven by a combination of high interest rates, improving government finances, and strong gold export earnings. According to Societe Generale strategist Gergely Urmossy, the risks surrounding Ghana’s economic outlook are already reflected in the currency’s value, and real rates are expected to remain high, providing further support for the cedi.
As of 1:27 p.m. in Accra on September 13, 2024, the cedi had weakened by 0.1% to 15.69 per dollar, marking a year-to-date loss of 24%. Concerns have persisted that government spending could rise ahead of the December presidential elections, as has been observed in previous election years. However, Ghana’s government has projected a 2024 deficit of 4.2% of GDP, a slight improvement from the earlier estimate of 4.8%, aligning with forecasts from the International Monetary Fund (IMF).
The IMF has provided Ghana with a $3 billion bailout to aid in the restructuring of the nation’s debt, following a default in 2022. Furthermore, the Bank of Ghana has kept its benchmark policy rate at 29% since January, while inflation has cooled from 23.5% to 20.4%, bolstering real inflation-adjusted interest rates.
Additionally, Ghana’s gold exports have provided crucial support to the economy, helping to counterbalance weaker revenues from cocoa exports, which have been affected by adverse weather conditions. Absa Group strategist Nikolaus Geromont also noted that a rise in Ghana’s current account surplus could ease the pace of the cedi’s depreciation.
Ghana’s economic outlook continues to improve as key sectors stabilize, providing optimism for a potential recovery of the cedi.
